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Turnover reflects specific training better than wages do

  • Lalith Munasinghe


    (Barnard College, Columbia University)

  • Brendan O'Flaherty


    (Columbia University - Department of Economics)

Turnover falls with tenure ¡ª this is one of the best established empirical regularities of labor economics ¡ª but finding a tenure effect on wages seems to be very hard. Within-job wage cuts do not seem very uncommon either. We reconcile these findings by revisiting an old question: how gains from firm specific training are split between workers and firms. The division is determined by a stationary distribution of outside offers. The model is ex post monopsony: the lower a wage a firm pays to a specifically trained worker, the more profit it makes and the more eager it is to have her stay, but the more likely she is to leave. The optimal time paths of wages and turnover probabilities show that even if marginal product is increasing, wages need not be increasing; but rising marginal product always implies a falling turnover rate.

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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-18.

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Length: 26 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:clu:wpaper:0102-18
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